Blue Bird (BLBD)

High QualityTimely Buy
We’re firm believers in Blue Bird. Its superior and growing returns on capital suggest its competitive advantages are expanding. StockStory Analyst Team
Anthony Lee, Lead Equity Analyst
Max Juang, Equity Analyst

1. News

2. Summary

High QualityTimely Buy

Why We Like Blue Bird

With around a century of experience, Blue Bird (NASDAQ:BLBD) is a manufacturer of school buses and complementary parts.

  • Annual revenue growth of 16.5% over the past two years was outstanding, reflecting market share gains this cycle
  • Incremental sales over the last two years have been highly profitable as its earnings per share increased by 156% annually, topping its revenue gains
  • Stellar returns on capital showcase management’s ability to surface highly profitable business ventures, and its rising returns show it’s making even more lucrative bets
We expect great things from Blue Bird. The valuation looks fair in light of its quality, so this might be a favorable time to buy some shares.
StockStory Analyst Team

Why Is Now The Time To Buy Blue Bird?

At $42 per share, Blue Bird trades at 9.6x forward P/E. This valuation is attractive, and we think the stock is likely trading below its intrinsic value when considering its fundamentals.

We jump for joy when high-quality companies trade at bargain prices because shareholders can benefit from both earnings growth and a positive re-rating - a powerful one-two punch.

3. Blue Bird (BLBD) Research Report: Q1 CY2025 Update

School bus company Blue Bird (NASDAQ:BLBD) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 3.7% year on year to $358.9 million. The company’s full-year revenue guidance of $1.45 billion at the midpoint came in 0.9% above analysts’ estimates. Its non-GAAP profit of $0.96 per share was in line with analysts’ consensus estimates.

Blue Bird (BLBD) Q1 CY2025 Highlights:

  • Revenue: $358.9 million vs analyst estimates of $356.8 million (3.7% year-on-year growth, 0.6% beat)
  • Adjusted EPS: $0.96 vs analyst estimates of $0.95 (in line)
  • Adjusted EBITDA: $49.21 million vs analyst estimates of $47.31 million (13.7% margin, 4% beat)
  • The company reconfirmed its revenue guidance for the full year of $1.45 billion at the midpoint
  • EBITDA guidance for the full year is $200 million at the midpoint, above analyst estimates of $197.9 million
  • Operating Margin: 9.4%, down from 10.4% in the same quarter last year
  • Free Cash Flow Margin: 5.2%, down from 15% in the same quarter last year
  • Sales Volumes rose 1.8% year on year (-2.2% in the same quarter last year)
  • Market Capitalization: $1.23 billion

Company Overview

With around a century of experience, Blue Bird (NASDAQ:BLBD) is a manufacturer of school buses and complementary parts.

Blue Bird, founded in 1927, began as a small bus body manufacturer for local schools. Over the following decades, it expanded its geographic presence to school districts nationwide.

Today, Blue Bird offers school buses that differ in size and configuration, ranging from buses designed for ~20 students to larger buses that accommodate upwards of 90 passengers. Its buses can be customized with a range of features including air conditioning, collision mitigation systems, and GPS tracking. While the majority of its sales derive from its diesel bus, the company also offers electric and hybrid alternatives.

In addition to its bus sales, it also provides replacement parts and accessories. Specifically, this consists of OEM (original equipment manufacturer) parts such as engines and transmissions as well as aftermarket parts like seating options and electronic systems.

Blue Bird typically engages in supply agreements, particularly for providing fleets of buses to larger school districts. These contracts may span several years and include provisions for ongoing parts and services. In addition to bus sales, Blue Bird offers leasing or financing options to accommodate the budgetary constraints of schools and organizations. Rentals are less common but are an option for short-term needs.

4. Heavy Transportation Equipment

Heavy transportation equipment companies are investing in automated vehicles that increase efficiencies and connected machinery that collects actionable data. Some are also developing electric vehicles and mobility solutions to address customers’ concerns about carbon emissions, creating new sales opportunities. Additionally, they are increasingly offering automated equipment that increases efficiencies and connected machinery that collects actionable data. On the other hand, heavy transportation equipment companies are at the whim of economic cycles. Interest rates, for example, can greatly impact the construction and transport volumes that drive demand for these companies’ offerings.

Competitors offering similar products include Lion Electric (NYSE:LEV), IC Bus (NYSE:NAV), and Thomas Built Buses (FRA:DAI).

5. Sales Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, Blue Bird’s sales grew at a tepid 5% compounded annual growth rate over the last five years. This wasn’t a great result compared to the rest of the industrials sector, but there are still things to like about Blue Bird.

Blue Bird Quarterly Revenue

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Blue Bird’s annualized revenue growth of 16.5% over the last two years is above its five-year trend, suggesting its demand recently accelerated. Blue Bird Year-On-Year Revenue Growth

We can better understand the company’s revenue dynamics by analyzing its number of units sold, which reached 2,295 in the latest quarter. Over the last two years, Blue Bird’s units sold averaged 6.8% year-on-year growth. Because this number is lower than its revenue growth, we can see the company benefited from price increases. Blue Bird Units Sold

This quarter, Blue Bird reported modest year-on-year revenue growth of 3.7% but beat Wall Street’s estimates by 0.6%.

Looking ahead, sell-side analysts expect revenue to grow 9.4% over the next 12 months, a deceleration versus the last two years. Despite the slowdown, this projection is healthy and implies the market sees success for its products and services.

6. Gross Margin & Pricing Power

Cost of sales for an industrials business is usually comprised of the direct labor, raw materials, and supplies needed to offer a product or service. These costs can be impacted by inflation and supply chain dynamics.

Blue Bird has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 13.4% gross margin over the last five years. That means Blue Bird paid its suppliers a lot of money ($86.58 for every $100 in revenue) to run its business. Blue Bird Trailing 12-Month Gross Margin

In Q1, Blue Bird produced a 19.7% gross profit margin, up 1.3 percentage points year on year. Blue Bird’s full-year margin has also been trending up over the past 12 months, increasing by 1.5 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

7. Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Blue Bird was profitable over the last five years but held back by its large cost base. Its average operating margin of 4.7% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

On the plus side, Blue Bird’s operating margin rose by 7.4 percentage points over the last five years, as its sales growth gave it operating leverage.

Blue Bird Trailing 12-Month Operating Margin (GAAP)

This quarter, Blue Bird generated an operating profit margin of 9.4%, down 1 percentage points year on year. Conversely, its revenue and gross margin actually rose, so we can assume it was less efficient because its operating expenses like marketing, R&D, and administrative overhead grew faster than its revenue.

8. Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Blue Bird’s EPS grew at a spectacular 17.3% compounded annual growth rate over the last five years, higher than its 5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Blue Bird Trailing 12-Month EPS (Non-GAAP)

We can take a deeper look into Blue Bird’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Blue Bird’s operating margin declined this quarter but expanded by 7.4 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Blue Bird, its two-year annual EPS growth of 154% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q1, Blue Bird reported EPS at $0.96, up from $0.89 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Blue Bird’s full-year EPS of $3.55 to grow 19.9%.

9. Cash Is King

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Blue Bird has shown weak cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.9%, subpar for an industrials business.

Taking a step back, an encouraging sign is that Blue Bird’s margin expanded by 2.7 percentage points during that time. We have no doubt shareholders would like to continue seeing its cash conversion rise as it gives the company more optionality.

Blue Bird Trailing 12-Month Free Cash Flow Margin

Blue Bird’s free cash flow clocked in at $18.75 million in Q1, equivalent to a 5.2% margin. The company’s cash profitability regressed as it was 9.8 percentage points lower than in the same quarter last year, but it’s still above its five-year average. We wouldn’t put too much weight on this quarter’s decline because capital expenditures can be seasonal and companies often stockpile inventory in anticipation of higher demand, causing short-term swings. Long-term trends are more important.

10. Return on Invested Capital (ROIC)

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Blue Bird’s five-year average ROIC was 34.1%, placing it among the best industrials companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

Blue Bird Trailing 12-Month Return On Invested Capital

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Blue Bird’s ROIC has increased significantly. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.

11. Balance Sheet Assessment

Companies with more cash than debt have lower bankruptcy risk.

Blue Bird Net Cash Position

Blue Bird is a profitable, well-capitalized company with $130.7 million of cash and $101.2 million of debt on its balance sheet. This $29.59 million net cash position is 2.4% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

12. Key Takeaways from Blue Bird’s Q1 Results

We enjoyed seeing Blue Bird beat analysts’ revenue, EPS, and EBITDA expectations this quarter. We were also glad its full-year EBITDA guidance slightly exceeded Wall Street’s estimates. Overall, this print had some key positives. The stock remained flat at $37.50 immediately following the results.

13. Is Now The Time To Buy Blue Bird?

Updated: June 14, 2025 at 10:09 PM EDT

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

There are several reasons why we think Blue Bird is a great business. Although its revenue growth was uninspiring over the last five years, its growth over the next 12 months is expected to be higher. And while its low gross margins indicate some combination of competitive pressures and high production costs, its expanding operating margin shows the business has become more efficient. In addition, Blue Bird’s projected EPS for the next year implies the company’s fundamentals will improve.

Blue Bird’s P/E ratio based on the next 12 months is 9.6x. Scanning the industrials landscape today, Blue Bird’s fundamentals really stand out, and we like it at this bargain price.

Wall Street analysts have a consensus one-year price target of $51.57 on the company (compared to the current share price of $42), implying they see 22.8% upside in buying Blue Bird in the short term.